The view is as ironic as the reality. Standing on the edge of a house under construction in Bethlehem, I can see the Church of Nativity, Israel’s separation Wall surrounding Bethlehem, the city’s traffic, and the ever-expanding Israeli settlement Har Homa – while covering Palestinian-Israeli direct talks underway in Egypt.

Palestinians know the settlement as Jabal Abu Ghneim; Israel says it’s part of greater Occupied East Jerusalem. Palaestinians also know this illegal settlement of 30,000 residents was built in the height of the Oslo peace process on their private property.

As we prepare to go on the air, I think about how many times I’ve been in Bethlehem and how many stories I’ve filed out of this historic and spiritual town… Most of them have been about the way Bethlehem has been squeezed, cornered, and shrunk by the imposed and fast-encroaching reality of Israeli settlements. This town has literally changed in appearance, spirit, and life over the years. So much that a UN study last year said Israeli policies were shrinking urban Bethlehem and fragmenting its rural areas. Over the past four decades of Israeli occupation, the report said, Israeli settlement construction and related measures had shrunk Bethlehem by 87%, confining its growing population to less than twenty percent of their land.

This Tuesday, Palestinian and Israeli leaders met in Egypt’s Sharm Al-Sheikh. Joined by US Secretary of State Hillary Clinton and amid much media attention and speculation, the second round of talks was, well, going in circles. Palestinians and Israelis did not agree on an agenda for the talks, or on how to proceed in these talks. Consequently, the scheduled ceremonial events of the day were cancelled and the trilateral meeting [between Abbas, Netanyahu, and Clinton] was delayed. The sticky, or rather explosive, issue was Israel’s illegal settlement construction in the Occupied West Bank, including East Jerusalem. A unilateral and partial so-called moratorium on settlement construction in the West Bank, excluding Jerusalem, is due to expire at the end of September. Even though Palestinians were unhappy about this moratorium, which by Israeli reports was not respected, they say they’re unwilling to entertain a return to full-fledged settlement construction.

According to Palestinian negotiators, the Israeli Prime Minister wanted only to speak about security. Such a demand, officials told me, means that Israel wants its security demands to draw the boundaries of geography on the ground. “They want the shape and size of the future Palestinian state to be defined by those demands. That’s just not possible”, they said. In contrast, Palestinians wanted to talk about borders and security first and foremost. They argue that an agreement on these two main final status issues would lay the groundwork for other issues and allow for technical teams to get down to business.

But discussing borders while land is being carved out by settlements is a waste of time, Palestinians argue.

Sources tell me the atmosphere was intense in Sharm Al-Sheikh, with American and Egyptian diplomacy working until the last minute to save the talks from collapsing before they start. The center of tension was Netanyahu’s refusal to commit to any settlement freeze. It’s interesting that the US Administration, represented by the Secretary of State, came to these tense talks empty handed – no alternative way out to suggest, no decisive decision to ensure all sides are fulfilling their agreed-on obligations. A complete Israeli settlement freeze in the West Bank, including East Jerusalem, is part of Israel’s obligations in the Roadmap for peace [which was introduced and endorsed by the Bush Administration]. This Tuesday, Netenyahu’s team wanted it to be among the issues ‘on the table’.

Between live-shots, we speak to our sources and search for any and all new news lines and developments. On the Israeli daily Ha’aretz, a headline caught my eye: Israeli settlers receive 22% more government grants than ordinary Israelis living within the Green Line – or the internationally recognized Israeli borders. As the wind starts to pick up on the rooftop where I’m standing, looking in Bethlehem’s direction becomes harder. I turn around and face Har Homa. There, construction continues, unbothered by the talk of peace.

Mark Regev, an Israeli government spokesperson, told Aljazeera Palestinians should be ‘creative’ in dealing with the issue of settlements. On the ground, it’s quite difficult to see what kind of creativity can change or better the reality Palestinians here live. Where ever they may live in Bethlehem, the view from their balconies is one of the 19 Israeli settlements surrounding the District; built on their occupied land – and private property – and edging rapidly closer to their front yard. These settlements, illegal in international law, now occupy about half of the West Bank, isolating Palestinian communities behind military-run gates, checkpoints, and walls.

And yet, these Palestinians see world leaders play host to ‘peace talks’ and hear the Israeli Prime Minister pledging to make peace with the Palestinians while vowing to continue the march of settlement expansion in the West Bank right to their front door. It’s doubtful to imagine, in this scenario, how ‘creativity’ can change the picture or even fudge it prettier.

The wind is now gusting; uncompromising and cool – without much mind gymnastics, this feels as real as the mood around me…

Signing out from Bethlehem.

Nour Odeh has covered the Israeli-Palestinian conflict extensively for ten years.